The Strategic Guide to Corporate Restructuring and Share Transfers in the UAE

A share transfer in a UAE mainland company is not a private matter settled between buyer and seller. The sale agreement is only the first document. Until the change is written into the company's constitutional documents, executed in the form the authorities require, and reflected on the trade licence held by the emirate's economic department, the buyer is not a shareholder in any sense the registry recognises. Restructurings fail in the UAE far more often on this sequencing point than on price.

The same transaction behaves differently depending on where the company sits. A mainland limited liability company, a company registered in a commercial free zone, and a company incorporated in the Dubai International Financial Centre (DIFC) or the Abu Dhabi Global Market (ADGM) each move shares by a different mechanism, before a different body, with different documents.

Mainland transfers: the Companies Law and the licensing file

Mainland companies are governed by Federal Decree-Law No. 32 of 2021 on Commercial Companies, which replaced Federal Law No. 2 of 2015. For a limited liability company, the transfer is effected by amending the memorandum of association. That amendment is executed in the form prescribed for the company's constitutional documents and then filed with the licensing authority — in Dubai, the Department of Economy and Tourism; in the other emirates, the equivalent economic department — so that the shareholder register behind the trade licence is updated.

Two consequences follow. The first is that the company's own consent machinery has to run before anything is filed. Shareholder approval, and in many constitutions a board resolution, is a precondition rather than a formality. The second is that any condition attached to the licence itself — a regulated activity requiring approval from a sector regulator, for instance — has to be cleared before the licence is reissued in the new ownership.

Related: Our corporate restructuring services cover the drafting, approvals and filings behind a mainland transfer.

Pre-emption rights and minority shareholders

The Companies Law protects the existing shareholders of an LLC by giving them a right of first refusal over shares a member wishes to sell to an outsider. That right is not decorative. A transfer made without offering the shares to the other members in the manner the law and the memorandum require is exposed to challenge, and the challenge usually surfaces at the worst moment — when the buyer wants to sell on, or when the company needs a unanimous resolution.

Shareholders' agreements layer further restrictions on top: drag-along and tag-along provisions, consent thresholds, valuation formulas, restrictions on transfers to competitors. Where those provisions conflict with the memorandum of association, it is the memorandum that the registry will read. Aligning the two documents before a transaction, rather than after a dispute, is one of the more useful things counsel can do on a restructuring.

Ownership restrictions after the 2020 amendment

The requirement that a UAE national hold 51% of a mainland LLC was removed by Federal Decree-Law No. 26 of 2020, which took effect on 1 June 2021. Most mainland activities can now be held entirely by foreign shareholders, subject to a strategic-impact list on which restrictions remain. This changed the character of restructuring work: a great deal of it now consists of unwinding the nominee, side-letter and pledge arrangements that were built when the 51% rule applied, and replacing them with direct ownership.

That unwinding needs care. The old structures were documented in layers, and terminating one layer while leaving another in force can leave a former nominee with a recorded interest, a security interest, or a signature power that nobody intended to survive. A separate point worth keeping straight: the local service agent appointed by a foreign company's branch is a different arrangement altogether and remains lawful and, for a branch, necessary.

Mergers, demergers and creditor objection

Where the restructuring is a merger, a demerger or a reduction of capital rather than a transfer of shares, the Companies Law brings creditors into the process. The transaction must be publicised in the manner the law requires, and creditors are given a window in which to object before it becomes effective. Objections have to be resolved or secured; they cannot simply be waited out.

Plan the transaction around that window rather than treating it as an administrative delay at the end. It affects when employees can be transferred, when contracts can be novated, and when the surviving entity can hold the licences and registrations that the business needs to keep trading.

DIFC and ADGM: registrar-based transfers

DIFC and ADGM are common-law jurisdictions with their own companies legislation, their own courts, and their own financial regulators — the DFSA in the DIFC and the FSRA in ADGM. Share transfers in those jurisdictions look familiar to anyone who has done a transaction under English-style company law: a share transfer instrument, a directors' resolution, an updated register of members, and a filing with the DIFC Registrar of Companies or the ADGM Registration Authority.

The practical difference is not that these jurisdictions are more permissive about who may own shares — that gap narrowed considerably after 2020. It is that the constitutional documents can carry a wider range of share classes, transfer restrictions and governance arrangements, and that the courts interpreting them are common-law courts. Where a company is regulated by the DFSA or the FSRA, a change of controller also needs the regulator's approval, and that approval, not the registry filing, is usually the item on the critical path.

Tax consequences are now part of the analysis

Corporate tax was introduced by Federal Decree-Law No. 47 of 2022 and applies to financial years starting on or after 1 June 2023, at 0% on taxable income up to AED 375,000 and 9% above that. A restructuring can change which entity is the taxable person, which entities sit in a tax group, and how a gain on disposal is treated. VAT at 5% may also arise depending on how the transaction is structured.

None of this is a reason to avoid restructuring, but it is a reason to run the tax analysis before the documents are settled rather than after signing, because the answer sometimes changes the structure. Registration and filing obligations with the Federal Tax Authority also need to be updated when entities are created, merged or dissolved.

Related: See our tax advisory services for the corporate tax and VAT treatment of share transfers.

A workable sequence

1. Read the constitutional documents first. The memorandum, the shareholders' agreement and the trade licence tell you what consents exist and who controls them.
2. Run due diligence on the target's licences and registrations, not only its accounts. A licence condition or an unregistered lease can be the item that delays completion.
3. Fix the tax position before the structure is locked.
4. Take the corporate approvals in the right order, so that the resolutions match what is later filed.
5. File, and then check what the registry issued. The transaction is complete when the licence and the register say so.

Related Services: Our mergers and acquisitions team advises on restructurings and share transfers across mainland, free zone, DIFC and ADGM entities.

Disclaimer: The information provided in this article is for general informational purposes only and does not constitute legal advice. Readers should seek professional legal advice tailored to their specific circumstances before making any decisions or taking any action based on the content of this article.

Nour Attorneys Team

Additional Resources

• Resolving Corporate Restructuring And Share Transfers Disputes Effectively
• Common Corporate Restructuring And Share Transfers Mistakes to Avoid in Dubai
• How Proper Corporate Restructuring And Share Transfers Structuring Saves Millions